(Nairobi) – Starting in 2027, firms in Kenya will be required to disclose their performance on environmental, social, and governance (ESG) initiatives under a new mandatory reporting system. This move is part of the country’s adoption of international sustainability reporting standards that align with global practices.
The Institute of Certified Public Accountants of Kenya (ICPAK) has announced that the mandatory adoption of sustainability reporting under the International Financial Reporting Standards (IFRS S2) will begin on January 1, 2027. This change aims to standardize sustainability disclosures across different organizations, making them more transparent and easier to compare on a global scale.
The new reporting requirement will start with public interest entities (PIEs), which are large organizations that have significant influence on the economy and the public. PIEs include businesses whose failure could impact the financial system or harm large groups of people. These companies will be required to follow the sustainability reporting standards as part of the country’s efforts to improve transparency and corporate accountability. However, large non-PIEs will have an additional year to comply, with their reporting requirement beginning in 2028.
The adoption of these standards will take place in phases. Phase one, which began in January 2024, allowed all organizations to voluntarily adopt the sustainability reporting standards. This approach was intended to give businesses time to adjust and prepare for the upcoming mandatory requirements.
ICPAK Chairman Philip Kakai noted that the phased implementation is designed to ensure a smooth transition for organizations of all sizes. The first phase, focusing on voluntary adoption, allowed businesses to build capacity and familiarize themselves with the new reporting requirements. According to Kakai, this gradual process will enable organizations to gather the necessary data and align their internal processes with the new standards.
The second phase, which starts in 2027, will focus on mandatory adoption for public interest entities. Following that, the third phase will extend the requirements to small and medium-sized enterprises (SMEs), but they will have an extra year to comply, starting in 2029.
Additionally, the timelines for public sector entities are yet to be determined by ICPAK and will be addressed in the future.
Before firms officially start reporting, they will undergo a readiness assessment to ensure they are fully prepared to meet the new standards. Grace Kamau, the CEO of ICPAK, emphasized that the new reporting system will help investors, regulators, and other stakeholders make informed decisions based on reliable and transparent sustainability data.